Keep your car from eating your cash

Houses, depending on the location, can be a great earner as their value appreciates, but on the other hand, a car will lose value the very second you sit in the seat. On top of that you have the cost of fuel, ongoing maintenance, insurance and repairs… it seems to never end! However, if you’re prudent, maybe a little shrewd and prepared to put in just a little bit of effort, you can make sure that all of those expenses, as well as the cost of buying a car, are kept as low as possible.

Knowledge is power, and when it comes to buying a new car you need to be in a position of power to ensure you get the best deal possible. To start with, find out how much the dealer actually paid for the car. This information is freely available online, from such sites as Kelley Blue Book (www.kbb.com), and armed with this you can then avoid attempting to negotiate down from the sticker price and instead negotiate up from the invoice price.

You can also use the help of IntelliChoice (www.intellichoice.com) to find cars that haven’t sold well. This is important to know if your car falls into this category because the longer a car sits in the dealer’s lot, the more willing they are to negotiate.

Once a dealer has you hooked, it may offer the choice of a rebate or special financing. To get a quick assessment of which is better, go to www.bankrate.com, then click on “Calculators.”

Get the most value

If you plan to keep your vehicle longer than four years, it generally makes the best sense to finance it or pay cash, which will save you the most money, rather than lease it. Without getting into detail (and leases involve a lot of details), that’s because with a lease, you’re paying mostly for high initial depreciation. If you buy, you get the benefit of using the car in later years when the depreciation rate is much lower.

Furthermore, leasing rates are less attractive than they used to be. The gap in the monthly payment for a car that’s leased vs one that’s financed has narrowed dramatically; lease payments might run only $100 or so less per month on the typical new vehicle.

Other ways to maximize the value of your purchase

Turn your car into a tax deduction. Buying or leasing your vehicle through your practice, whether you’re a partner or an employee, is one of the smartest business decisions you can make. The deductions you’ll be able to take will help offset your annual vehicle costs.

Nevertheless, the IRS’ rules on reporting car expenses are some of the trickiest and most confusing in the tax code, and they’ve been known to give even experienced accountants fits. For instance, regulations govern the method of depreciation you can use and how you allocate miles between business and personal use. One section even defines a “car” for depreciation purposes. The best advice: Before you make an offer on a vehicle, sit down with your accountant, explain what type you’ve got your eye on, and crunch some numbers.

Purchase a used vehicle.

Pre-owned vehicles offer several compelling advantages. The original owner has paid for the steep initial depreciation, and insuring an older vehicle costs less. But buying a pre-owned auto from an individual can be a gamble, because you typically must agree to accept the vehicle as is. A dealership, on the other hand, will usually offer at least a limited warranty.

To lessen the chances that you’ll get burned, have your mechanic thoroughly inspect the car. Not only will this allow you peace of mind, but it may help you negotiate a better price if the mechanic detects a problem.

Another tip: Get the vehicle identification number (VIN) and order a report from somewhere like the NICB to determine whether the automobile has been in a major accident, suffered flood damage, or had its odometer rolled back.
I’ve done the same to check the record of a Toyota Camry that a salesman claimed had come off Lease prematurely and was almost new. A quick check of the VIN showed me that the car had been put into service only two months earlier, which certainly seemed to confirm the salesman’s story.

Buy a luxury car with a different name.

The pre-owned or pre-leased route may make particularly good sense if you’re buying a high-end vehicle. So can buying a previous year’s model. Better still, if you do your homework, you can get a brand-new vehicle that rides like a luxury model but costs thousands less.

Likewise, check to see whether the maker of the car you’re interested in sells it under another label. For instance, the Lexus LX 470 and the Toyota Land Cruiser are virtually identical SUVs, but the Lexus will set you back nearly $9,000 more.

Minimize the cost of keeping your wheels

What you pay up front is only half the story. Over time, you can spend as much to keep your car on the road as you did to buy it. To help shrink that insidious tab:

Whittle down insurance expenses.

Annual premiums for the same coverage on the same vehicle can vary by hundreds of dollars, because each insurer uses its own claims experience to set rates. The Internet is a good tool for comparison-shopping. You can also use the Yellow Pages. Insurance agents who work with several companies will be in the best position to offer lower rates.

When speaking with an agent ask about discounts for air bags, antitheft devices, antilock brakes, and automatic seatbelts. Some companies also offer lower rates to people with clean driving records, and to those who drive fewer than a certain number of miles annually or insure more than one car under the same policy.

Happy with your current insurer? Then consider increasing your deductibles, which will lower your rates. And think about trading your luxury or sports car for something cheaper to insure.

Watch how--and how much--you drive.

Altering your driving habits can help you get more miles per gallon of gas. By cruising at or under the speed limit, you’ll use less fuel (and possibly save yourself a ticket). Moreover, your vehicle’s overdrive or cruise-control option can help reduce gas consumption.

Also, avoid making several small trips throughout the day. Short trips, particularly on cold days, traumatize your engine and can reduce its life. Try to maintain a steady speed and avoid sudden starts and stops, which cause your engine to work harder and your brakes to wear faster.

Don't overpay for routine maintenance.

You can save hundreds of dollars a year on repairs by letting a discount chain or local garage handle brakes, front-end alignments, oil changes, and the like.

Use common sense, though. Your dealership’s charges for parts and labor may be pricey, but its mechanics are likely to be best trained to handle difficult jobs involving your vehicle.

Consider skipping some recommended maintenance. Yes, you ought to change your car’s oil and oil filter faithfully and replace brakes and tires before the old ones become unsafe. But do you have to follow the manufacturer’s recommended maintenance schedule to the letter?

Some leasing companies require you to so that you don’t void the manufacturer’s warranty. But if you purchased the car and don’t plan to keep it beyond 100,000 miles, you can put off replacing some parts if everything continues to run smoothly. These include the battery, water pump, exhaust system, and shock absorbers. Likewise, some minor recommended work, including tire rotations and the cleaning and adjusting of brakes, isn’t going to extend the life of those items by much.

When you do have work done, including oil changes, keep good records.

Maintenance paperwork will impress buyers, should you decide to sell the car privately. (Naturally, if you’re asked about what you haven’t done, you should be honest about that, too.)

If you do routine maintenance and fix small problems before they become big ones, you can easily get 100,000 to 150,000 miles out of a new automobile. Vehicles are generally much better built these days than they were even a decade ago. The longer you hang on to your car, the more value you’ll get for your money.

When it’s time to replace the old car, think about selling it yourself rather than trading it in. Dealerships rarely give you as much as you can get by selling privately.

I have always bought cars at half-life and run them until they died. This has saved me a lot of money, since I can do most of the basic maintenance. But, now that I’m getting older and don’t enjoy crawling under cars as much, I’m really thinking about getting an electric car. The thought of never changing the oil, coolant, hoses, belts or radiator really appeals to me. Plus, the regenerative brakes would last forever. Pleasant thoughts.

Bundling your trips together can save you gas as well as wear and tear on your vehicle, especially in cold weather. It takes longer for your car to warm up in the winter, and as you mentioned, driving on a cold engine isn’t good for your car. Bundling your trips lets your car engine stay warm, reduces wear and tear, and can help save a lot of gas. I also remove any extra weight from the car if it isn’t needed. Hauling extra things around doesn’t help with gas mileage!

I recently was told by my mechanic that my 9 year old Chevy Aveo with 63,000 miles only had a solid year left in it before it would need major engine work. I was angry that any car couldn’t make it past 70,000 miles. But then I did some research, took some advice, looked around and haggled for the best deal, and drove off with a new Honda Fit for $16,350 that has a great shot of lasting 150,000+ miles without any major work and I’m great at getting regular maintenance handled. That would last me 15 years or more with any luck.

When I purchased my car in 2011, it was used (2006 with 35k miles on it) and did some research that it “should” last roughly 200k miles, as it’s a Scion(Toyota)… My wife and I are a one car family, paid off the car, fill up the tank maybe once every two weeks or so, since we dont drive too much, insurance costs are low, I work from home and bike commute places I need to go…. it’s so nice not to have huge vehicular bills or debt because of thinking ahead.

Great article, lots of AMAZING information that many many people overlook and don’t realize can save them money!